The council has its first opportunity to pass next year's city budget Monday night, but considerable debate may occur over where to cut more than $72,000 from the general fund.

The original budget presented by the city to the council included significant increases to Homer harbor fees, which council members balked at. Instead, they moved funds from a Homer Spit lease from the general fund to the Port and Harbor Fund.

As a result, rate increases to harbor users fell significantly. For example, rates for moorage fees dropped from a proposed 15 percent increase to a 3.78 percent increase, or $19 more for mooring a 20-foot boat for a year.

What's good for harbor users, however, isn't so good for the general fund, which suffered a $72,101 deficit as a result of the transfer.

Prior to the transfer, city Finance Director Dean Baugh characterized the budget as remaining similar to last year's budget, with most departments maintaining this year's level of funding. One substantial increased cost is city insurance, which is predicted to climb 300 percent next year. In addition, the budget included a 2 percent cost of living increase for city employees.

City staff presented the council with a proposed list of amendments to rebalance the budget at a work session Monday afternoon. The city's nonprofit contribution took the largest blow, dropping $18,000 from its $100,000 proposed allotment.

Under the staff proposal, Public Works, the Homer Volunteer Fire Department and the Homer Chamber of Commerce would also drop $10,000 from their budgets. The staff proposed $5,000 cuts to the airport, police and parks as well as other areas, and miscellaneous smaller cuts to the library and transportation budgets.

In an effort to balance the Port and Harbor budget, the city also extended the bond from the Pioneer Dock from 10 years to 20, cutting annual expenses from $133,000 to roughly $85,000.

Council members had plenty of questions for staff at Monday's meeting, questioning the pay increases as well as funding for depreciation of the general fund required next year when new national accounting standards take effect.

Acting City Manager and Police Chief Mark Robl told the council he had pushed for the pay increase because of difficulty retaining police officers.

"I think this could be a relatively inexpensive way to keep employees," said Robl, adding that when police move to more profitable forces, the city loses invested time and money.

The council questioned Baugh about the $150,000 appropriated for general fund depreciation in anticipation of next year's alignment with new accounting standards.

"If we can't afford it this year, then we won't do it," said Baugh. "But it's kind of nice because it forces us to put money aside, but then we have the money put aside to do repairs."

Mayor Jack Cushing expressed discontent with the cut to the nonprofits, as well as the council's apparent changed view about accruing long-term debt.

"It's a question of, philosophically, how much debt you want to rack up," Cushing said.

Baugh noted that the city was on a schedule to be debt-free by 2009. With the council's changes to the budget, it would maintain debt through 2029.

Final amendments to the budget are expected Monday, with a work session starting at 4 p.m. and the council meeting to start at 7:30 p.m.